But is the real problem here OEM parts inefficiency? OEM parts are still by far the most reliable part type, and I believe that even when ordering is done by telephone, OEM parts ordering and receiving is the most efficient and timely process compared to all other part types.
The industry needs to recognize that it costs repairers millions of dollars to use alternate parts in the present system. For whose benefit? It's certainly not for the vehicle owner. Even though the following examples are based on used/recycled parts, they apply equally to aftermarket and reconditioned parts as well.
At the last Collision Industry Conference (CIC), survey results indicated that 85 percent of the respondents believe that when quoting used or recycled parts, the price quoted can be for any condition as long as the parts are described accurately. One key issue then is: How can the damages or condition be described accurately and consistently?.
It does not take a rocket scientist to calculate the time wasted in receiving bad parts. This includes condition along with accessory options and correctness. Many times the part already has been "sold" and is no longer available, even though it was just picked from the database (that obviously is not accurate or based on real time). Why hasn't real-time inventory and digital imaging, which provides detailed pictures of these parts, been implemented? There are simply no excuses acceptable for why these options are not available.
There are "real time" salvage part locating programs like ComSearch that allow recyclers to better facilitate the transaction between the preferred suppliers of the repairer, but some recyclers have elected not to participate. Is it because of the accountability it places on the suppliers or the transparency (exposure) it brings?
In the last CIC survey, 76 percent of respondents agreed that pricing should reflect undamaged condition and any damage allowances should be negotiated at the time of delivery. This isn't surprising since this is how business has been conducted for as long as I can remember.
But is this the system our industry should accept when doing business. What is "undamaged condition?" Does it include a prior repair done on the part that cannot be seen by the untrained person? Does it include aftermarket parts that have been used in place of OEM? Most of these issues still revolve around the credibility and accountability of the supplier of these parts, but also includes the insurance industry, which supports this broken system.
Why are there no service level agreements in place for alternate parts suppliers? Why is it that any negotiation for damages to these received parts takes place only between repairers and the part suppliers? Is it because the insurance industry believes that if they ignore the fact that parts regularly are not being delivered in the condition they were advertised then the problem does not exist? Does this have to do with the fact that because there is no documentation to support what the repair industry has suffered through for decades, insurers therefore have no responsibility?
The price paid for these parts must begin to reflect what the actual price paid was, not the price originally listed on the estimate. Any other method is "cost shifting" and should be considered fraud.
The amount of time needed to repair or prepare a part for acceptable use should be itemized to indicate what was actually performed on the vehicle as required by many state laws and ethically for the benefit of the vehicle owner on the final bill. This also allows those that use collision repair management systems to properly "flag" the labor for the preparation/repairs of these damaged parts. If you currently use a management system you are certainly aware of this issue and the "work arounds" you have had to employ when dealing with this issue.
Many states do not charge sales tax on labor, so if a part price is left "as is," insurers are overpaying sales taxes compared to what they would be paying if the part price was reduced to accurately reflect its cost with the necessary labor worked in to prepare/repair it for use on the vehicle.
Another change that needs to be considered is using the same parts profit percentage received for used/recycled parts as the one for using OEM for parts. I have seen markup percentages as low as 20 percent (17 percent gross profit) in areas for these parts when the shop receives 25 percent to 35 percent gross margins with OEM parts. What incentive does this provide a repairer especially after you consider all the other factors that arise when using recycled parts?
To achieve a better bottom line for salvage recovery, insurers are increasingly selling vehicles to offshore buyers and/or allowing the vehicles to be rebuilt and placed back on the streets. If insurers would simply support state or federal titling laws that prevent these vehicles from being rebuilt, it would quickly make more parts available and affordable.
The last area that needs to be examined involves labor guides for used/recycled parts. For these issues, I urge you to post inquiries on www.degweb.org for all to see. Take the time to make sure the times are accurate and reflect the operations whether they are for new or used parts. Imagine if one rental day saves insurers millions, how much they would save on our behalf when labor operations times are set to where they should be to accurately reflect what is necessary to repair a vehicle properly? It's time we all should wake up and understand what this broken system actually costs us as well.
Please send your comments, questions and potential discussion topics you would like to see addressed in future columns to [email protected] . For additional information you can also visit www.aeii.net.
